The coronavirus pandemic has inflicted heavy damage to households and businesses – large and small – to an extent never seen before. As governments tried to marshal resources to protect lives, it quickly became apparent that, in many cases, livelihoods were affected as economies came to a standstill as a result of different measures including lockdowns. In many countries, social safety nets were inadequate, and this created all sorts of vulnerabilities.
It is important to place the covid pandemic in its proper perspective before delving into what economic recovery will require. First, we must bear in mind that although Covid-19 has had a severe impact, Africa is still confronted with pre-existing pandemics, such as HIV/AIDs, TB, and Malaria, which continue to kill more people than Covid. Those pandemics are still not receiving the attention they deserve in terms of a global response because they are essentially a problem for the Global South. In the 1990s, it took a long time, a decade, for anti-retroviral drugs to become affordable and accessible. The question before us, therefore, becomes: Is there a risk that covid replicates the same trajectory? That is to say, once the Global North has vaccinated a critical number of its people, covid becomes an endemic problem for low-income countries like pre-existing pandemics. If so, that will have a significant impact on the economies as they suffer the burden of both the old pandemics and the new pandemic.
The economic recovery of the countries in the Global South will essentially depend on four factors: i) the path of the coronavirus ii) the rate of vaccination iii) global supply chains iv) multilateral action. At this point, no one is certain as to the path of the covid virus as it continues to mutate. Moreover, the rate of vaccination is still low, less than 10% in Africa as a whole.
On the economic side, the virus has interrupted the global supply chains, the cost of transporting goods has increased dramatically, and the impact is being felt by importers and consumers alike at the marketplace.
So, there’s enormous work that needs to be done for the kind of recovery that will address these vulnerabilities. But where will the resources, both public and private, come from at a time of massive social needs and contracting fiscal base? The ability of countries to galvanise domestic (and to attract foreign) investment will determine whether we can widen the tax base, build social inclusion through massive job creations, and create social safety nets. In this regard, investment will be key. To return to growth, Africa needs to have a rate of investment – public and private – above 30% of GDP.
Moreover, it will be time to turn economic growth into economic transformation. After all, there is evidence that since independence in the 1960s Africa’s extractive economies (rich in minerals) have not performed any better than those that are not endowed with vast natural resources. Dependency on natural resources will have to steadily give way to participation in the global supply chain at higher levels.
We are entering a phase where some of the commodity producers will have a huge advantage: copper prices are the highest ever; and there are similar trends for cobalt, etc. This trend is mainly driven by the energy transition – from fossil fuels. However, the need to diversify our economies remains paramount for obvious reasons. For one thing, relying on commodity prices to foster growth is risky because producers are vulnerable to market volatility.
In addition to fostering inclusive and non-volatile growth, Africa needs to turn its challenges into opportunities for investment. For instance, this pandemic has exposed the continent’s overreliance on the global supply chain in diagnostics, therapeutics, and especially vaccines. So, it’s quite correct for countries to begin to explore opportunities such as those in vaccine manufacturing.
Synergy in multilateral responses
This crisis has demonstrated the inadequacy of the multilateral architecture both in preparedness and response. Countries in the Global North galvanized massive stimulus packages. Those in the Global South have no means to do so. Therefore, there is need to synchronize the return to growth such as the recent release of 650 billion Special Drawing Rights (SDR). However, a lot of these SDRs have gone to wealthy countries – the G8 and G20 – that do not need them and only 33 billion SDRs were released to African governments. The ideal in terms of economic stimulus would be the implementation of the decision to recycle 100 billion SDR to these countries that need them.
Whether one looks at it through the prism of global solidarity or through that of self-interest for the wealthiest countries, synchronizing the return to growth to include the financial needs of developing countries is the fastest path to global recovery. There is a simple reason for that: in the long run, real growth can only come from the most demographically dynamic parts of the world, which are Africa and Asia. What we call megatrends in Africa – growing population, young population, and rural-to-urban migration – are still there. For anyone focused on the long term (not these short-term issues like commodity prices), these three megatrends alone create huge economic opportunities in Africa, which no other part of the world has, except perhaps the Middle East and parts of Asia. On its part, Africa needs to invest more in human capital to increase and leverage these demographic opportunities.
So now, what have we learned? One, Africa must work to become part of the supply chain for some of the key products that Africans need. Interestingly, some countries like Rwanda and Senegal have taken this lesson seriously – they are now planning to get mRNA technology for malaria and tuberculosis. Two, Africa’s integration must accelerate via the African Continental Free Trade Area.
However, these efforts must be complemented with deepening trade. For example, the recently launched Pan African Payment Settlement System (PAPSS), perhaps the most significant development for Africa in recent years, will go a long way in facilitating intra-Africa trade by removing impediments related to settlement of payments via third party foreign currency. In the same light, there’s a need to agree on the single air market and on the visa on arrival scheme for bona fide African business operators.
The pandemic has stalled economies across the world and interrupted Africa’s growth path since the early 2000s. GDP has shrunk, the tax base has dwindled, and expenditure needs – driven, in part, by the need to heavily invest in the health sector – are higher at the time when debt service has increased. However, global recovery – not just African recovery – is what is needed in the larger scheme of things. If by some stroke of miracle global policymakers take a decision that brings about our synchronized return to growth as it happened in 2008, and if Africans themselves make the right choices at the continental and domestic levels, the possibility to recover and return to the path of growth is still there. But before everything else, we must focus on three things: vaccination, vaccination, and vaccination!
However, and this is fundamental, none of the above will matter until we “Silence the Guns” and keep out the fires in some of these conflict-affected areas, such as in the Greater Sahel.